REVENUE REGULATIONS

NO. 16-2006
dated August 15, 2006
REVENUE REGULATIONS NO. 16-2006

• SUBJECT : Submission by Taxpayers of Electronic

Books of Accounts and Other Accounting Records in
the Course of a Tax Audit/Investigation

• TO : All Internal Revenue Officers and Others

Concerned
Background.

Section 5 (A) of the National Internal Revenue Code (NIRC) of 1997 provides:

“SEC. 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and
Take Testimony of Persons. – In ascertaining the correctness of any return, or in making a
return when none has been made, or in determining the liability of any person for any
internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the
Commissioner is authorized:
(A) To examine any book, paper, record, or other data which may be
relevant or material to such inquiry;

xxx xxx xxx “

This Section authorizes the Bureau of Internal Revenue (BIR) to examine the
books and other accounting records of the taxpayer. The words “any book,
paper, record, or other data” hereinmentioned would comprise both
computerized and manual books of accounts and other accounting records.
Thus, the BIR or its duly authorized Revenue Officers (ROs) may examine
taxpayers’ computerized accounting books and records in the course of a
tax audit or investigation pursuant thereto.
 Moreover, Section 27 of RA No. 8792, otherwise known as the Electronic

Commerce Act of 2000, mandates all government offices, including the Bureau

of Internal Revenue ( BIR), to perform governmental functions using electronic

documents.

With the authority granted and the requirements prescribed under the two

aforementioned laws, these Regulations are issued to lay down the policies,

guidelines and procedures on the submission by taxpayers of books of accounts

and other accounting records in electronic form specifying:

a. The manner and format in which such computerized accounting
books/records shall be created, retained, filed and issued; 2

b. When and how such computerized accounting books/records have to

be signed or authenticated;

c. The appropriate control processes and procedures to ensure integrity,

security and confidentiality of computerized accounting books/records;

d. Other attributes required of computerized accounting books/records;

and e. The full or limited use of the documents and papers for
compliance with the requirements of the BIR
SECTION 1
Scope – Pursuant to the provisions of Section 244 in relation to Section 245
of the National Internal Revenue Code (NIRC) of 1997, these Regulations are
hereby promulgated to prescribe the submission by registered computerized
taxpayers of their books of accounts and other accounting records, in
electronic form, during a tax audit or investigation, in accordance with the
provisions of Sections 5 (A), 6 (A), 232 (A), 233, 235 and 237 of the NIRC of
1997 in relation to Section 27 of Republic Act (RA) No. 8792.
SECTION 2 Definition of Terms
2.1 Computerized Accounting Books/Records – refers to books of accounts and other accounting

records in electronic form, such as electronic documents, transaction files, customer or vendor

master files, and other files/databases maintained and used by a taxpayer in and under a

computerized accounting system.

2.2 Electronic Document – refers to information or the representation of information, data, figures,

symbols or other modes of written expression, described or however represented, by which a right

is established or an obligation extinguished, or by which a fact may be proved and affirmed, which is

received, recorded, transmitted, stored, processed, retrieved or produced electronically.

2.2 Electronic Document – refers to information or the
representation of information, data, figures, symbols or other
modes of written expression, described or however represented,
by which a right is established or an obligation extinguished, or by
which a fact may be proved and affirmed, which is received,
recorded, transmitted, stored, processed, retrieved or produced
electronically.
2.3 Electronic Signature – refers to any distinctive mark, characteristic
and/or sound in electronic form, representing the identity of a person and
attached to or logically associated with the electronic data message or
electronic document or any methodology or procedures employed or
adopted by a person and executed or adopted by such person with the
intention of authenticating or approving an electronic data message or
electronic document.
2.4 Media – refers to the physical forms of recorded information. This
includes paper, film, computer disks, computer tapes, and any other
materials on which information can be recorded.
2.5 CD-R (Compact Disc-Recordable) – an optical data storage written and
read using lasers that can be read or viewed only but cannot be modified,
deleted, or written over with new data. Recordable CDs are WORM
(Write Once, Read Multiple).
2.6 DVD-R (Digital Video Disc- Recordable) – a new generation of optical
disc storage technology which holds more data than the CD-R.
2.7 Database – refers to a stored collection of related electronic data
used by organizations to meet their information processing
requirements. It is normally associated with software to access and
manipulate that data.
2.8 Data -a representation of information in a formalized manner suitable for
communication, interpretation, or processing. Data consists of letters, numbers, or
symbols.

2.9 File – a named collection of records stored or processed as an individual entity.

2.10 Records – a collection of related fields containing data items grouped for
processing and considered sub-units of a file.

2.11 Field or data element– a specified area of a record used for storing a particular
class of data. Fields are sub-units of a record.

2.12 Fixed length file – a file in which each record has the same number of characters.
2.13 File formats – a standard of organizing and storing the data in the
file such that specific applications will be able to use the data. Common
examples of file formats include

a. Dbase File Format – a format typically created from personal

computer-based databases and has a *.dbf file extension.

b. Delimited Format - a format composed of records in which the

fields are not in a fixed position in the record. Instead, each field in
the record is separated by a field separator character, such as a
comma.
2.14 Authentication – a confirmation that the record is accurate,
complete and appropriate to the actions taken. Methods of
authenticating electronic records include authentication of a hard copy
document that accompanies the electronic media, authentication of a
label attached to the media, linking a digital signature to the electronic
file/document and design of a unique location-specific procedure for
authentication of electronic records.
 SECTION 3. Examination of Computerized Books of Accounts and Other
Accounting Records
The books of accounts and other accounting records, documents,
schedules, and other information, submitted by a taxpayer in electronic
form, collectively referred herein as computerized accounting
books/records, may be examined by duly authorized Revenue Officers
(ROs) and BIR officials in the course of a tax audit or investigation of the
taxpayer, pursuant to Section 5 (A) of the NIRC of 1997.
 At the time of examination, the retained computerized accounting
books/records of the taxpayer must be capable of being retrieved from
the computer system and converted to a standard format that would
allow efficient examination and testing of such records using BIR audit
tools during a tax examination, particularly in cases involving large
volumes of transactions.
SECTION 4. Submission of Taxpayer Accounting
Records in Electronic Form for BIR Examination

The books of accounts and other accounting records in electronic format

that were submitted and registered with the concerned BIR office within thirty
(30) days from the close of the taxable year pursuant to Revenue
Memorandum Order (RMO) No. 29-2002 shall be provided to the BIR by the
taxpayer upon audit/investigation. This does not preclude the BIR from
requesting other transaction files which may contain information or
transactions which occurred during the particular taxable year covered by the
examination, which were not included in the original data submitted.
 The required electronic or computerized accounting records should be
submitted within the due date reflected on the document authorizing the audit(i.e.
Letter of Authority, Audit Notice, etc). The number of days within which the
computerized accounting records have to be submitted shall not exceed five (5)
days from receipt of the document authorizing the investigation.

If the taxpayer maintains accounting books and records in both electronic and
manual (hardcopy) formats, the Revenue Officers auditing said taxpayers may
require the presentation of both electronic and manual books/records.

During verification process, the taxpayer is required to present the documents

supporting the entries made in the Computerized Accounting System (CAS).
 The computerized accounting books/records shall be submitted to the
concerned Revenue Officers. Access to the computerized accounting
books/records shall be restricted to the Revenue Officers assigned to handle the
tax examination. After the report of investigation and the tax docket of the case
has been reviewed and approved by the authorized Revenue Official, the
Revenue Officers shall return to the taxpayer their computerized accounting
books/records intact and in their original form. Nonetheless, if there are
discrepancies found upon tax audit that results to tax assessments, the Revenue
Officers/Examiners may request for certified true copies, in hard copy and/or
electronic format, of the portion of the accounting books and pertinent
accounting records that would serve as evidence or proof of the audit findings.
SECTION 5. Requirements for Submission of
Accounting Books/Records in Electronic Format
The books of accounts and other accounting records, documents,
schedules, files and other data or information that are required to be
submitted by a taxpayer to the BIR under these regulations shall be those,
but not limited to electronic books, reports, documents, files and data that
had been produced using the computerized accounting system or
components of a computerized accounting system that have previously
been evaluated and approved by the Computerized Systems Evaluation
Team (CSET), a team organized through RMO 29-2002 and shall be in
electronic form, stored in recordable compact discs (CD-R), digital video
discs (DVDR) or other optical media, depending on the volume of the
transactions or size of the business, and in a format that is readable by the
BIR audit tools, as specified in the letter request for submission of data, e.g.
in fixed length flat text, delimited or dBase format.
 The CD-Rs, DVD-Rs or other optical media should be properly labeled with the
name of taxpayer, taxable year, content description, serial number, volume number
and such other information required under RMO No. 29-2002 and its amendatory
issuances. To ensure that authorized users can identify, access and retrieve
information stored on CDs, DVDs or other optical media, their external labels should,
likewise, indicate the application system/software, including the version number of
the application system/software used to create their contents. These should also be
accompanied by a document describing the file attributes or layout, that is, the
number of records in each data file; the control totals for each numeric field, where
applicable; the record layouts and record lengths; and the documentation of key
control information, including the transaction cutoff date and time.
 A duly notarized certification in the form of an affidavit shall be executed
by the taxpayer or his authorized representative, attesting the completeness,
accuracy and appropriateness of the computerized accounting books/records,
in accordance with the keeping of books of accounts and records for internal
revenue tax purposes, and should be submitted together with the accounting
books, records, etc., in electronic form. The CDs, DVDs or other optical media
should also be properly authenticated and its label duly signed by the
responsible official(s) of the company who are required to sign the tax returns
under the Tax Code, using a permanent marker. The taxpayer may require the
Revenue Officer to acknowledge receipt of the electronic files and documents.
 The notarized certification shall be submitted in hard copy, as
currently, legal documents are not yet prepared electronically in the
Philippines. However, whenever this facility becomes available and
acceptable in the country, notarized certification in electronic form may
be allowed and submitted.
 For the proper understanding of the taxpayer’s business processes
that were used to create and maintain the computerized accounting
books and records, the taxpayer under investigation is required to
provide the concerned Revenue Officers with an overview of the
computerized accounting systems used during the taxable period under
audit. It is understood that the computerized accounting system used
or being used by the taxpayer has been previously approved by the BIR.
In relation hereto, any subsequent change or enhancement to such
computerized accounting system shall require approval of the BIR.
SECTION 6. Retention of Electronic
Documents and Electronic Files
Pursuant to Section 13 of RA No. 8792, the books of accounts and
other accounting records, documents, files, schedules and other
information submitted by a taxpayer to the BIR in electronic form
should be retained in their original form and:
A.Remain accessible so as to be usable for subsequent reference; and
B.Retained in the format in which it was generated, sent or received,
or in a format which can be demonstrated to accurately represent
the electronic document generated, sent or received.
 The aforementioned books/records shall be retained in accordance
with the rules on preservation of books of accounts and other
accounting records provided in Section 235 in relation to Sections 203
and 222 of the NIRC of 1997.
SECTION 7. Legal Recognition of
Electronic Document
In relation to Section 7 of RA No. 8792, electronic documents submitted
for purposes of a tax audit or investigation shall have the legal effect,
validity or enforceability as any other document or legal writing subject
to the following conditions:
a. If an electronic document is able to maintain its integrity and
reliability through time and can be authenticated for subsequent
reference, in that
1. The electronic document has remained complete and unaltered,
apart from the addition of any endorsement and any authorized
change, or any change which arises in the normal course of
communication, storage and display; and
2. The electronic document can be relied upon for the purpose for
which it was generated and for all the relevant circumstances.
b. If an electronic document has been presented or retained in its original
form, in that –
1. There exists a reliable assurance on the integrity of the document
from the time when it was first generated in its final form; and
2. That document is capable of being displayed to the person to
whom it is to be presented.

Under existing laws and these regulations, an electronic document shall

be the functional equivalent of a written document for evidentiary
purposes.
SECTION 8. Compliance Enforcement – In instances where the taxpayer
fails to comply with the provisions of these Regulations, the procedures
prescribed in the issuance and enforcement of Subpoena Duces Tecum
shall be followed.

SECTION 9. Penalty Clause – Any violation of the provisions of these

Regulations shall be subject to the penalties provided for under the
pertinent provisions of the NIRC.
SECTION 10. Repealing Clause – All existing revenue regulations and
other issuances or portions thereof that are inconsistent herewith are
hereby revoked, repealed or amended accordingly.

SECTION 11. Effectivity Clause – These Regulations shall take effect

after fifteen (15) days following its publication in any newspaper of
general circulation.